Commodity Traders To Monitor Key Indicators For Favourable Trade

Commodity Traders To Monitor Key Indicators For Favourable Trade 

In the past fortnight, the commodity market oscillated between gains and losses, driven by statements from some FOMC officials emphasising a "higher-for-longer" approach to monetary policy, juxtaposed with softer economic data from the US supporting arguments for the Federal Reserve to start monetary easing this year. 

The US dollar exhibited volatility, ranging between 104.8 and 105.7, reflecting mixed signals regarding the US economy alongside predominantly hawkish remarks from Fed officials. These comments reiterated the intention to maintain higher interest rates to curb inflation towards the central bank's 2 per cent target. Additionally, continuing claims, serving as a proxy for unemployment benefit recipients, saw a significant increase to 1.79 million, the most substantial rise in a month. The weak labour report fueled expectations of a rate cut in September, prompting gains across global equities. However, concerns about a US economic slowdown and heightened short-term inflation expectations moderated enthusiasm for riskier assets. 

COMEX Gold surged to a three-week high of USD 2,385.3 per troy ounce, ending the past week with approximately 3 per cent gains. Silver similarly experienced a surge of around 7 per cent to USD 29 per troy ounce, benefiting from both gold's performance and gains in industrial metals. 

WTI crude oil approached USD 80 per barrel, influenced by ongoing geopolitical tensions in the Middle East. Particularly as Israel indicated its commitment to continue operations against Hamas in the Gaza Strip independently of US support. Furthermore, a decrease in US crude inventories and an increase in Saudi Arabia's Official Selling Price (OSP) to Asia for the third consecutive month in June provided support to oil prices. 

LME base metals generally traded higher, boosted by reduced down payments and the removal of property purchasing restrictions in major Chinese cities. However, Aluminium experienced a decline of over 1 per cent following record inflows at LME warehouses. 

"On the MCX Copper May futures, a gap-up opening and sharp rally in the past fortnight led to a two-year high, indicating a bullish bias. The price is currently trading above the 20SMA and Supertrend (7,3), confirming a bullish short-term trend."

On the MCX Copper May futures, a gap-up opening and sharp rally in the past fortnight led to a two-year high, indicating a bullish bias. The price is currently trading above the 20SMA and Supertrend (7,3), confirming a bullish short-term trend. If the closest support level of 850 remains intact, the price could continue to rise towards 886. 

Unexpectedly plummeting preliminary UoM Consumer sentiment, coupled with surges in one-year and five-year inflation expectations, prompted a reassessment of rate cut probabilities. The CME FedWatch tool now indicates a 60 per cent likelihood of a rate cut in the FOMC September meeting, down from 70 per cent post-jobless claims data. 

Looking ahead, market participants will closely monitor the upcoming US inflation data and Fed officials' speeches for insights into the timing of potential policy adjustments. The CPI is expected to slightly ease to 3.4 per cent in April, although still significantly above the Fed's comfort zone. Additionally, key indicators from China will be scrutinized for clues about April's economic performance following favourable trade figures. 

The release of monthly reports from OPEC and the International Energy Agency assumes significance, especially after the Energy Information Administration (EIA) revised its oil demand estimates for 2024. This could heighten concerns among oil market participants.